DELAFIELD, Wis. (Stockpickr) -- Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short squeeze develop as the bears rush to cover their positions to avoid big losses. Even the best short-sellers know that it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.

This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short time frame that your profits add up quickly.

That said, let's not forget that stocks are heavily shorted for a reason, so you have to use trading discipline and sound money management when playing earnings short-squeeze candidates. It's important that you don't go betting the farm on these plays and that you manage your risk accordingly. Sometimes the best play is to wait for the stock to break out following the report before you jump in to profit off a short squeeze. This way, you're letting the trend emerge after the market has digested all of the news.

Of course, sometimes the stock is going to be in such high demand that you risk missing a lot of the move by waiting. That's why it can be worth betting prior to the report -- but only if the stock is acting technically very bullish and you have a very strong conviction that it is going to rip higher. Just remember that even when you have that conviction and have done your due diligence, the stock can still get hammered if Wall Street doesn't like the numbers or guidance.

If you do decide to bet ahead of a quarter, then you might want to use options to limit your capital exposure. Heavily shorted stocks are usually the names that make the biggest post-earnings moves and have the most volatility. I personally prefer to wait until all the earnings-related news is out for a heavily shorted stock and then jump in and trade the prevailing trend.

With that in mind, let's take a look at several stocks that could experience big short squeezes when they report earnings this week.



GoPro

My first earnings short-squeeze play is wearable camera player GoPro(GPRO) - Get Report, which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect GoPro to report revenue of $340.99 million on earnings of 18 cents per share.

The current short interest as a percentage of the float for GoPro is very high at 40.2%. That means that out of the 47.95 million shares in the tradable float, 19.27 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 4.8%, or by about 883,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of GPRO could easily rip sharply higher post-earnings as the bears rush to cover some of their trades.

From a technical perspective, GPRO is currently trending just above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last two months, with shares moving higher from its low of $37.13 to its recent high of $46.73 a share. During that uptrend, shares of GPRO have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of GPRO within range of triggering a major breakout trade post-earnings.

If you're bullish on GPRO, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key near-term overhead resistance at $46.73 a share (or above Tuesday's intraday high if greater) with high volume. Look for volume on that move that hits near or above its three-month average action of 6.44 million shares. If that breakout develops post-earnings, then shares of GPRO will set up to re-test or possibly take out its next major overhead resistance levels at $50.95 to $55 a share, or even $60 a share.

I would simply avoid GPRO or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at its 50-day moving average of $42.96 a share and then below more support at $42.87 a share with high volume. If we get that move, then GPRO will set up to re-test or possibly take out its next major support levels at $40.37 to $37.13 a share. Any high-volume move below $37.13 will then give GPRO a chance to tag its next big support level at around $30 a share.

Lumber Liquidators

Another potential earnings short-squeeze trade idea is home improvement stores player Lumber Liquidators(LL) - Get Report, which is set to release its numbers on Wednesday before the market open. Wall Street analysts, on average, expect Lumber Liquidators to report revenue $258.01 million on earnings of 16 cents per share.

The current short interest as a percentage of the float for Lumber Liquidators is extremely high at 27.6%. That means that out of the 26.14 million shares in the tradable float, 7.21 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 8.5%, or by about 562,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of LL could easily spike sharply higher post-earnings as the bears move fast to cover some of their positions.

From a technical perspective, LL is currently trending below both its 50-day and 200-day moving averages, which is bearish. this stock has been consolidating and trending sideways over the last month, with shares moving between $31.81 on the downside and $35.18 on the upside. Any high-volume move above the upper-end of its recent range post-earnings could trigger a major breakout trade for shares of LL.

If you're in the bull camp on LL, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key near -term overhead resistance levels at $34.33 to $35.18 a share and then above more resistance at $37.78 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 5.32 million shares. If that breakout hits post-earnings, then LL will set up to re-test or possibly take out its next major overhead resistance levels around $42.50 to $45 a share. Any high-volume move above $45 will then give LL a chance to re-fill its previous gap-down-day zone from March that started near $52 a share.

I would simply avoid LL or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term supports levels at $31.81 to $30 a share with high volume. If we get that move, then LL will set up to re-test or possibly take out its next major support level at is 52-week low of $27.15 a share.

Vasco Data Security International

Another potential earnings short-squeeze candidate is security software player Vasco Data Security International (VDSI) , which is set to release numbers on Tuesday before the market open. Wall Street analysts, on average, expect VASCO Data Security International to report revenue of $54.50 million on earnings of 21 cents per share.

The current short interest as a percentage of the float for VASCO Data Security International is extremely high at 47.2%. That means that out of the 28.97 million shares in the tradable float, 13.68 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 6.9%, or by about 887,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of VDSI could easily jump sharply higher post-earnings as the bears scramble to cover some of their positions.

From a technical perspective, VDSI is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending a bit for the last month, with shares moving higher from its low of $20.56 to its recent high of $26.84 a share. During that uptrend, shares of VDSI have been making mostly higher lows and higher highs, which is bullish technical price action.

If you're bullish on VDSI, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $26.84 to around $28 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.64 million shares. If that breakout materializes post-earnings, then VDSI will set up to re-test or possibly take out its 52-week high of $31.84 a share. Any high-volume move above that level will then give VDSI a chance to tag $35 a share.

I would avoid VDSI or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at $24.66 a share to its 50-day moving average of $24.03 a share with high volume. If we get that move, then VDSI will set up to re-test or possibly take out its next major support levels at its 200-day moving average of $21.61 to $20.56 a share, or even $18 a share.

Virgin America

Another earnings short-squeeze prospect is regional airline player Virgin America (VA) , which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Virgin America to report revenue of $322.15 million on earnings of 14 cents per share.

The current short interest as a percentage of the float for Virgin America is pretty high at 9.4%. That means that out of 21.78 million shares in the tradable float, 2.05 million shares are sold short by the bear. This is a decent short interest on a stock with a very low tradable float. Any bullish earnings news could easily spark a monster short-squeeze for shares of VA post-earnings that forces the bears to cover some of their positions.

From a technical perspective, VA is currently trending below its 50-day moving average, which is bearish. This stock has been consolidating and trending sideways over the last month and change, with shares moving between $28.49 on the downside and around $34 on the upside. Any high-volume move above the upper-end of its recent range post-earnings could trigger a big breakout trade for shares of VA.

If you're bullish on VA, then I would wait until after its report and look for long-biased trades if this stock manages to break out above key near-term overhead resistance levels at $32.38 to $34 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 1.10 million shares. If that breakout gets set off post-earnings, then VA will set up to re-test or possibly take out its next major overhead resistance levels at $38 to $40 a share, or even $43 a share.

I would simply avoid VA or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at $29 to $28.50 a share with high volume. If we get that move, then VA will set up to re-test or possibly take out its next major support level at $26.50 a share. Any high-volume move below that level will then give VA a chance to tag $25 to even $20 a share.

Buffalo Wild Wings

My final earnings short-squeeze trading opportunity is casual restaurant player Buffalo Wild Wings (BWLD) , which is set to release numbers on Tuesday after the market close. Wall Street analysts, on average, expect Buffalo Wild Wings to report revenue of $451.87 million on earnings of $1.63 per share.

The current short interest as a percentage of the float for Buffalo Wild Wings is pretty high at 9.5%. That means that out of the 18.69 million shares in the tradable float, 1.78 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 11.9%, or by about 189,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of BWLD could easily rip sharply higher post-earnings as the bears move quick to cover some of their bets.

From a technical perspective, BWLD is currently trending well above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been uptrending a bit over the last few weeks, with shares moving higher from its low of $173.50 to its intraday high on Monday of $184.29 a share. During that uptrend, shares of BWLD have been making mostly higher lows and higher highs, which is bullish technical price action. that utprend is coming after shares of BWLD formed a double bottom chart pattern off previous support at $173.83 to its recent low of $173.50 a share. Shares of BWLD are now starting to trend within range of triggering a near-term breakout trade post-earnings.

If you're in the bull camp on BWLD, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day moving average of $184.87 a share to some more near-term overhead resistance at $186.66 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 397,022 shares. If that breakout triggers post-earnings, then BWLD will set up to re-test or possibly take out its next major overhead resistance levels at $193.50 to its 52-week high of $195.83 a share. Any high-volume move above $193.50 will then give BWLD a chance to tag or take out $200 a share.

I would avoid BWLD or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some key near-term support levels at $175 to $173.50 a share with volume. If we get that move, then BWLD will set up to re-test or possibly take out its next major support levels at $165 to its 200-day moving average of $164.23 a share, or even $160 to $155 a share.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.